Shutdown seen merging with debt-limit fight amid impasse

By Mike DorningBloomberg News

The partisan battles over the U.S. government shutdown and a potential debt default are beginning to merge into a single fiscal fight, raising the stakes for Republicans and Democrats to end the impasse. More

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politics

Shutdown seen merging with debt-limit fight amid impasse

PRESIDENT BARACK OBAMA urged Congress in remarks Tuesday to end the government shutdown and raise the debt ceiling. As the two issues have become increasingly intertwined, and the possibility of the government defaulting on its debt becomes more real, U.S. stocks and the dollar fall.

WASHINGTON - The partisan battles over the U.S. government shutdown and a potential debt default are beginning to merge into a single fiscal fight, raising the stakes for Republicans and Democrats to end the impasse.

Lawmakers from both parties are linking the two issues more closely, a connection the White House is reinforcing, according to an administration official who asked for anonymity to discuss strategy. President Barack Obama met today with financial industry executives to focus attention on the risk of a default.

With no immediate progress on resolving the federal closure, the standoff over funding the government is increasingly likely to continue as a deadline closes in to raise the debt limit. Treasury Secretary Jacob J. Lew yesterday repeated the warning that the U.S. will exhaust its borrowing authority on Oct. 17, in a letter to House Speaker John Boehner.

“There’s no doubt in my mind now that the debt ceiling and shutdown are conjoined in one big tar baby,” said Steve Bell, a onetime Republican Senate budget aide and now a senior director at the Bipartisan Policy Center in Washington.

Stocks fall

Recognition of the strengthening linkage rippled through financial markets this morning, as stocks slid around the world and gold rallied. The dollar fell, while Treasuries rose.

The MSCI All-Country World Index dropped 0.3 percent at 11:43 a.m. in New York and the Standard & Poor’s 500 Index slid 0.5 percent. The 10-year Treasury yield fell five basis points to 2.60 percent. The dollar weakened versus nine of 16 major currencies.

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